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A presentation on the future prospects for machine to machine (M2M) services, including: market sizing and forecasting of revenues and connections a discussion of market drivers forecasts by vertical market a discussion of sales channels for M2M case studies
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RefNo | Commercial in confidence
Future of M2M
Presentation for Cambridge Wireless
Tom Rebbeck
4 December 2013
RefNo | Commercial in confidence
Analysys Mason has been active in M2M, working for operators, vendors,
regulators and governments…
2
RefNo | Commercial in confidence
… as well as regularly publishing reports as part of our IoT and M2M
solutions research programme
3
Source: Machine-to-machine traffic worldwide: forecasts and analysis 2011–2016, Analysys Mason, 2011
Capability and experience
RefNo | Commercial in confidence
4
RefNo | Commercial in confidence
M2M can reduce costs and make new ideas possible
5
The Social Bicycles bike hire scheme
RefNo | Commercial in confidence
M2M forecasts have been nothing if not bullish
6
Ericsson, February 2011; http://www.ericsson.com/res/docs/whitepapers/wp-50-billions.pdf
Other forecasts for 2020 include: IDC 212 billion devices; ABI 30 billion; Cisco 50 billion; Gartner 26
billion
RefNo | Commercial in confidence
Growth has been rapid, but not stellar
7
Annual growth in M2M connections by country, most recent published data (2012/2013)
-20%
0%
20%
40%
60%
80%
100%C
ze
ch
Re
pu
blic
…
Bu
lga
ria
(E
C)
La
tvia
(E
C)
Esto
nia
(E
C)
Fra
nce
(A
rce
p)
Ma
lta
(E
C)
Fra
nce
(E
C)
Lith
ua
nia
(E
C)
Ire
land
(E
C)
Belg
ium
(E
C)
Cyp
rus (
EC
)
Sw
ed
en
(P
TS
)
UK
(E
C)
Sw
ed
en
(E
C)
Be
lgiu
m (
Mo
bis
tar…
Ge
rma
ny (
EC
)
Po
lan
d (
EC
)
Ne
therl
and
s…
No
rwa
y (
NP
T)
So
uth
Afr
ica
…
Lithu
ania
(R
RT
)
Ne
therl
and
s (
EC
)
Sp
ain
(E
C)
Slo
va
kia
(E
C)
Ne
therl
and
s…
Sp
ain
(C
MT
)
US
A (
AT
&T
…
De
nm
ark
(IT
ST
)
De
nm
ark
(E
C)
De
nm
ark
(T
DC
)
Ita
ly (
EC
)
Ave
rage…
An
nu
al gro
wth
ra
te
217%
RefNo | Commercial in confidence
Most Western European countries have less than 1 million M2M
connections
8
M2M connections by country, million, Western Europe, 2012 (Source: Analysys Mason, European Commission)
-
1
2
3
4
5
6
7
8
Ita
ly
Fra
nce
UK
Sw
ed
en
Spain
Germ
an
y
Ne
the
rla
nd
s
No
rwa
y
Belg
ium
De
nm
ark
Fin
land
Sw
itzerl
an
d
Ire
lan
d
Port
uga
l
Austr
ia
Gre
ece
RefNo | Commercial in confidence
Per capita, this corresponds to one M2M connection for every 13 people
9
M2M connections per capita, 2012 (Source: Analysys Mason, European Commission)
-
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45 S
wed
en
No
rwa
y
De
nm
ark
Ita
ly
Fin
land
Ire
lan
d
Belg
ium
We
ste
rn E
uro
pe
Fra
nce
UK
Ne
the
rla
nd
s
Spa
in
Sw
itzerl
an
d
Germ
an
y
Port
uga
l
Austr
ia
Gre
ece
Ce
llula
r co
nn
ectio
ns p
er
ca
pita
RefNo | Commercial in confidence
The drivers for M2M remain strong
▪ From a demand side:
– With low growth rates, economic actors are
looking to reduce costs/increase efficiency
– Tyler Cowen in the “Great Stagnation” argues that
the low hanging fruit of growth have been picked
and new sources are needed
▪ From a supply side:
– The cost elements are significantly lower
▪ of network
▪ of devices
10
Growth in world output, developed and emerging
economies, 2011-2014
Source: World Economic Outlook Update, IMF, 23 Jan, 2013
RefNo | Commercial in confidence
We maintain our belief in the long term prospects for M2M
11
M2M cellular connections (million) Western Europe, 2011-2018 (Source: Analysys Mason)
0
20
40
60
80
100
120
140
160
180
200
2011 2012 2013 2014 2015 2016 2017 2018
RefNo | Commercial in confidence
The value of connections will grow by almost four times between 2012 and
2018…
12
M2M connectivity revenues, 2011-2018 (Source: Analysys Mason 2013)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2011 2012 2013 2014 2015 2016 2017 2018
EU
R (
bill
ion
)
RefNo | Commercial in confidence
But will remain a small portion of an operator’s overall connectivity
revenues…
13
M2M connectivity revenues, relative to handset revenues, 2011-2018 (Source: Analysys Mason 2013)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2011 2012 2013 2014 2015 2016 2017 2018
M2
M a
s %
of h
an
dse
t re
ve
nu
es
EU
R (
bill
ion
)
RefNo | Commercial in confidence
Mainly due to low ARPUs relative to the handset business [1/2]
14
M2M connectivity revenues and monthly M2M ARPU, 2011-2018 (Source: Analysys Mason 2013)
0
5
10
15
20
25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2011 2012 2013 2014 2015 2016 2017 2018
EU
R (
mo
nth
ly)
EU
R (
bill
ion
)
RefNo | Commercial in confidence
Mainly due to low ARPUs relative to the handset business [2/2]
15
M2M connectivity revenues and monthly M2M and handset ARPU, 2011-2018 (Source: Analysys Mason 2013)
0
5
10
15
20
25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2011 2012 2013 2014 2015 2016 2017 2018
EU
R (
mo
nth
ly)
EU
R (
bill
ion
)
RefNo | Commercial in confidence
Much of the value is concentrated in a small number of vertical markets
(and a small number of contracts in those markets)
16
M2M connections by vertical market (Source: Analysys Mason 2013)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015 2016 2017 2018
Industrial
Financial services
Government
Public sector
Retail
Healthcare
Security
Automotive and transport
Utilities
RefNo | Commercial in confidence
Operators are looking at a number of vertical markets…
17
Legend:
Vertical where the operators is currently focused on
Vertical sectors Operator
A
Operator
B
Operator
C
Operator
D
Operator
E
Operator
F
Operator
G
Operator
H
Utilities
Automotive and transport
Healthcare
Security
Asset management
Consumer electronics
ePOS
Track and trace
RefNo | Commercial in confidence
… but focus is on firmly on utilities and automotive & transport, at least
with the bigger operators
18
Vertical sectors Operator
A
Operator
B
Operator
C
Operator
D
Operator
E
Operator
F
Operator
G
Operator
H
Utilities
Automotive and transport
Healthcare
Security
Asset management
Consumer electronics
ePOS
Track and trace
Legend:
Vertical from where the operator expects stronger growth
RefNo | Commercial in confidence
We believe that operators need five elements to make a successful M2M
business
19
Elements of a successful M2M business [Source: Analysys Mason, 2013]
Dedicated M2M team and
infrastructure
Communi-cation rich
offering with value-added
services
Credible partnerships
Secure network with
device certification processes
Solution based business
model
RefNo | Commercial in confidence
20
MNOs and MVNOs can play multiple roles in the M2M value chain
M2M operator categories based on role
in the M2M value chain
Categories MNO P-
MVNO
A-
MVNO
E-
MVNO
Com
ponents
of the M
2M
valu
e c
hain
Connectivity
M2M platform
Managed services
System integration
Customer support
Application
Equipment
Key
Value chain requirements for MNOs and MVNOs
Required Often provided Sometimes
provided
P-MVNO: An M2M platform-MVNO’s (P-MVNO) main
offer is a connectivity platform to facilitate the
management of M2M connections on a network.
A-MVNO: An M2M application-MVNO’s (A-MVNO) main
offer is an M2M application and a customer support
solution for specific industry verticals or M2M applications.
E-MVNO: An M2M equipment-MVNO’s (E-MVNO) main
offer is a piece of equipment (e.g., vending machine,
smart meter or diabetes monitoring device) equipped with
a connectivity module.
RefNo | Commercial in confidence
21
Examples and characteristics of M2M operators, and a further description
of the relationship between operator and enterprise customers
Scenarios for the role of different types of player in the M2M value chain
Categories MNO P-MVNO A-MVNO E-MVNO
Examples of
operators
AT&T, France
Telecom, Sprint,
TeliaSonera,
Vodafone
Arkessa, Mobiquithings,
SimService, Telenor
Connexion, Transatel
Solutions
OnAsset, Digi
International, Mobius
Networks
Landis+Gyr, TomTom
Number of
SIMs per
contract
More than 10 000 Depends on type of P-
MVNO
More than 100 and
less than 10 000 More than 10 000
Vertical-
specific? No Yes/No Yes Yes
Description of
relationship
between
operator and
customer
MNO owns
relationship with
the enterprise
buyer
P-MVNO owns
relationship with
enterprise buyer, or will
assume a subcontractor
or vendor partner role
In most cases, the A-
MVNO owns the client
relationship with the
enterprise
In many cases, E-
MVNOs own the
relationship with the
enterprise
RefNo | Commercial in confidence
Case study: AT&T’s M2M connectivity could be embedded in millions of
General Electric’s industrial components
22
AT&T’s role in supporting GE’s Predix platform
AT&T is not
involved in this
aspect of the
Predix platform
AT&T will help GE
to source and
certify M2M
devices
AT&T will provide
multi-modal
connectivity to
include fixed,
mobile and
satellite,
leveraging its US
network and
worldwide SIM.
AT&T may
provide some of
the cloud and
security
capabilities (via
NetBond if data is
going back to a
private cloud)
People Machines Network Server
Predix
Experience Predix Machine Predix Net Predix Server
Component of GE’s Predix platform
AT&T’s supporting role
Key
RefNo | Commercial in confidence
Key messages
▪ Companies (and investors) interested in M2M need to take a long view
▪ The drivers for long term growth in M2M remain strong
▪ Revenues from connectivity alone will be low and may not be enough for operators
23
RefNo | Commercial in confidence
Contact details
24
Tom Rebbeck
Research Director
Cambridge
Tel: +44 (0)845 600 5244
Fax: +44 (0)1223 460866
Dubai
Tel: +971 (0)4 446 7473
Fax: +971 (0)4 446 9827
Dublin
Tel: +353 (0)1 602 4755
Fax: +353 (0)1 602 4777
Edinburgh
Tel: +44 (0)845 600 5244
Fax: +44 (0)131 443 9944
Johannesburg
Tel: +27 11 666 4786
Fax: +27 11 666 4788
Madrid
Tel: +34 91 399 5016
Fax: +34 91 451 8071
Milan
Tel: +39 02 76 31 88 34
Fax: +39 02 36 50 45 50
New Delhi
Tel: +91 124 4501860
Paris
Tel: +33 (0)1 72 71 96 96
Fax: +33 (0)1 72 71 96 97
Singapore
Tel: +65 6493 6038
Fax: +65 6720 6038
Boston
Tel: +1 202 331 3080
Fax: +1 202 331 3083
Manchester
Tel: +44 (0)845 600 5244
Fax: +44 (0)161 877 7810
London
Tel: +44 (0)845 600 5244
Fax: +44 (0)20 7395 9001
0)1223 460866